AO 2006-16: Misappropriated funds

A candidate committee whose former treasurer misappropriated funds may accept reimbursement from that individual’s parents without considering the receipt a contribution. Funds returned by the former treasurer may be treated in the same manner. The committee should report the misappropriated funds as an “Other Disbursement” and the returned funds and reimbursement as “Other Receipts.”

Background

In early April 2006, Randy Maddox, who was the treasurer of the Campaign to Elect Nancy Detert at the time, misappropriated $94,616.90 from the Detert Committee to his personal bank account. Soon thereafter, Mr. Maddox withdrew the funds and left for Argentina. Several days later, Mr. Maddox returned to the United States with $67,450 in cash, which was then deposited into a bank account. On that same date, Randy Maddox’s parents, applied for a home equity loan. The next day, Mr. Maddox’s mother obtained a bank check for $94,616.90, consisting of the $67,450 deposited on the previous day and $27,166.90 in funds drawn from the parent’s home equity loan, and delivered the check to her son’s attorney, who placed the funds in his client trust account where the disposition of the funds was within Mr. Maddox’s sole discretion. Subsequently, the Detert Committee accepted the $67,450 from the trust account and deposited it into the committee account, but requested Commission guidance with respect to the remaining $27,616.90.

Analysis

The committee may accept and deposit the $27,616.90, even though the funds are not directly traceable back to the misappropriated funds.¹ Mr. Maddox’s parents provided the funds to their son solely in an effort to mitigate his potentially severe criminal liability and financial jeopardy , not for the purpose of influencing a federal election. As such, the funds will not constitute a contribution by Mr. Maddox’s parents to the Detert Committee. The parents are only interested in aiding their son, and the fact that the ultimate recipient of the reimbursement is the victimized Detert Committee is merely incidental to the parents providing the funds to their son.

The committee should report the misappropriation as an “Other Disbursement” on its July Quarterly Report, with the name and address of Mr. Maddox as the recipient, along with the amount and date of the misappropriation and a brief description of the circumstances. The receipt of both the $67,450 and $27,616.90 should be reported separately as “Other Receipts.” The committee should itemize these receipts by disclosing the name and address of Mr. Maddox as the source, and the amounts and dates of the receipts. It should also provide a brief description of the circumstances, including a cross-reference to the “Other Disbursement” entry.

Length: 4 pages; Date: May 10, 2006.

¹ Although the Detert Committee had already accepted the $67,450 reimbursement (which as past activity was not the subject of the advisory opinion), the Commission noted that such acceptance was permissible because the returned $67,450 was directly traceable to the very funds misappropriated by Mr. Maddox.